The Bonus Employees Really Want, Even If They Don’t Know It Yet

Ask your employees this: “How would you like to be rewarded for your efforts and performance, in addition to your fixed salary?” They will likely respond by asking for a cash reward in the form of a raise or bonus, which they can then spend on themselves. They might even convince you that spending this extra cash on the newest tablet on the market, or Daft Punk’s next album, will motivate them to work “harder, better, faster, stronger.”

Take what they say with a grain of salt.

Giving your employees money, and the freedom for them to spend it on whatever reward they choose, might sound like the recipe for a happy and more productive workplace. But evidence from an array of scientific studies says otherwise. Individual rewards—ranging from pay-per-performance to bonuses—have been shown to be detrimental to employee morale and productivity.

First, monetary rewards tend to decrease the individual’s intrinsic motivation and interest for the job. Second, unless the job is extremely simple (requiring no creativity, problem-solving, or complex reasoning abilities), monetary rewards can paradoxically impair performance by leading employees to focus too much on the up-coming extra cash. Finally, when employees compare their end-of-year bonuses, we see more jealousy, anxiety, and competition, and less trust, sharing, and teamwork in the workplace. If your employees are working in groups, the effect is compounded: deterioration of these relationships damages both their individual happiness as well as how they work together as a team.

So, should you throw away the carrot once and for all? Not quite. We suggest that you try something new and potentially far more effective: prosocial bonuses.

Instead of giving your employees more money to spend on themselves, what if you provide them the same bonuses with one caveat: they must be spent on prosocial actions towards charities and co-workers? We tested this very idea, with our collaborators Lara B. Aknin, Michael I. Norton, and Elizabeth W. Dunn: in three countries, we examined the power of prosocial bonuses across different professions and cultures.

First, National Australia Bank gave some of their employees money to spend on charities. This differs from the classic corporate social responsibility model, where the company donates a lump-sum amount of money to a charity usually selected by the CEO. In this method, the company cannot measure the impact of this act of kindness on the dynamics within the firm or on public image. As an alternative to lump-sum donation, the bank gave each employee their own charity voucher and encouraged them to spend it on a cause that they cared about, whether it was to fund cancer research or save Australian ducks. After redeeming these prosocial bonuses, employees reported being more satisfied with their jobs and happier overall.

Next, we wanted to see what would happen if people were nice to others they personally know, rather than being charitable towards strangers. We also wondered whether prosocial bonuses are motivating for everyone, or just for bankers (!), who might often spend money on themselves. In our next set of examinations, we encouraged spending on co-workers and teammates. We gave cash to some members of dodgeball teams in Canada and pharmaceutical sales teams in Belgium and asked them to spend on each other. When asked to give gifts to one another, team members reported indulging in a box of chocolate or bottle of wine, and one team even reported buying a piñata, which they gladly bashed together. Prosocial bonuses appeared to change the way team members thought of their interactions with one another, resulting in gifts that increased shared experiences. Most importantly, we found that teams that received prosocial bonuses performed better after receiving the bonuses than teams that received money to spend on themselves.

Earlier, we mentioned that it is nearly impossible to measure the return on investment in corporate social responsibility. With prosocial bonuses, however, we were able to measure the dollar impact on the bottom line. On sports teams, every $10 spent prosocially led to an 11% increase in winning percentage compared to a two percent decrease in winning for teams where members spent on themselves. On sales teams, for every $10 spent prosocially, the firm gained $52.

Nowadays, people spend more and more time at work, yet less than half of working Americans report being happy with their jobs. Maybe it is time to be creative with the rewards and switch from a self-centered to an altruistic paradigm. Rather than spending a significant amount of time wondering about the big holiday bonus, what if your employees spent some time figuring out how their donations can impact the world, or what kind of gift will make their co-workers happy?

Maybe then money can be a path to spreading happiness and productivity in the workplace.

Lalin Anik, Ph.D. is a post-doctoral fellow at Duke University’s Fuqua School of Business. Her personal page is www.lalinanik.com. Jordi Quoidbach, Ph.D. is an Assistant Professor in the Department of Economics and Business at Pompeu Fabra University. His personal page is www.quoidbach.org.